For an orthodox Jewish rabbi, Shmuel Boteach has an unorthodox way of doing things. The New York-educated cleric drinks vodka, allows non-Jews to join his Oxford-based debating society and sees nothing wrong in using Playboy magazine to push his ideas on 'kosher' sex. He is also on first name terms with Mikhail Gorbachev and former Israeli Prime Minister Shimon Peres.

But this weekend it is not Boteach's radical approach to spreading Hasidic Jewish teaching that is shocking British Jewry so much as allegations about the activities of his Oxford University L'Chaim Society and its associated charitable trust.

L'Chaim is Hebrew for 'to life'. And according to the 32-year-old rabbi's detractors, Boteach - 'Shmuley' to his friends - has taken the society's philosophy too literally.

Last week the Charity Commission froze the trust's bank account, citing concerns about 'the application and control of the charity's funds'.

The commission wants to question trustees about payments to meet the mortgage on Boteach's £400,000 home in north London. The Observer has also learnt that Boteach and his family have the run of a large house in Oxford, albeit thanks to the generosity of an unnamed Israeli benefactor.

Perhaps most damaging are reports of widespread staff disaffection with Boteach's management style amid allegations that while fund-raising for Jewish causes he has been using employees of L'Chaim to promote the financial interests of major donors.

According to documents obtained by The Observer, in June 1997, Boteach's then executive assistant at the L'Chaim Society, Esther Flint, wrote to Rabbi J. Gutnick, a multimillionaire, in Melbourne, Australia, offering to help him in 'developing awareness' in Britain of his mining projects. The letter began: 'I understand that a significant element of the job is devoting time to promoting your companies to the financial markets of UK and Europe. Therefore Rabbi Boteach thought it pertinent I contact you in order that I may introduce myself.'

Soon after, Flint resigned. Boteach acknowledges that Gutnick, who made his fortune in gold mining, was a key donor but claims Flint's offer was never taken up. 'There was no question of a tit for tat arrangement,' he told The Observer .

The Charity Commission is pressing ahead with a formal investigation and has asked to meet the trustees this week to clarify a series of transactions - including cheques drawn on the trust's account for Boteach's salary and payments for this year's fund-raising dinner and a car pool for L'Chaim employees.

Boteach says L'Chaim's trustees took legal advice before setting up the trust account to meet the mortgage payments on his London home and were assured that it conformed to charity regulations. He maintains that the house was being used for fund-raising dinners and charity-related work.

According to Boteach, the investigation is little more than a 'witchhunt' got up by his enemies in the Jewish establishment who have always disapproved of his talent for self-promotion. But former employees tell a different story, claiming his private face is at odds with the engaging image he presents in the media and on chat shows like Oprah Winfrey's.

They say Boteach makes impossible demands on staff and when they fail to meet expectations they are sacked or persuaded to resign. In one two-year period, Boteach dismissed six directors of the Oxford society, accusing each of gross misconduct. The allegations were strenuously denied and one former director is now threatening to sue for libel over alleged comments Boteach made to the chairman of the trust's governors, Michael Sinclair.

As long as Boteach attracted speakers like Gorbachev, Peres and Diego Maradona to Oxford, and the donations continued to pour in, he continued to enjoy the confidence of the trustees. By 1995 the turnover from L'Chaim events was £183,000 - far more than any other Oxford student society - and two years later donations to the trust totalled £450,000.

But by now the university proctors were becoming concerned that L'Chaim was being run as a business and no longer complied with the membership rules for a student society. As a result, Boteach wound down L'Chaim's Oxford activities and began spending more time in London.

By 1998 he was riding high. His first book, The Jewish Guide to Adultery, giving Talmudic advice on how to improve one's marriage, had been serialised in the Daily Mail and he had just sold his second, Kosher Sex , to Playboy for a reported £200,000.

Then, last April, Katrin Levy, a journalist on a north London Jewish newspaper, began to investigate reports of staff disenchantment. Instead of publishing her findings she decided to show them to the paper's proprietor - Michael Sinclair, chairman of L'Chaim's board and Boteach's boss. 'By going to Sinclair I hoped he would investigate the allegations and act on them,' says Levy.

The next day Levy was told to hand her documents back to Boteach. She refused and went to the police, who passed the documents to the Charity Commission, triggering this week's events. Levy subsequently left her job.

Sinclair declined to comment to The Observer. Instead, the trustees issued a statement claiming the allegations were 'utterly without foundation' and the society had done 'absolutely nothing wrong'. But the damage to Boteach's reputation may have already been fatal.

Yesterday the Chief Rabbi's office told The Observer that although Boteach had been invited to participate in an end of Sabbath prayer service at the prestigious New West End synagogue in central London, he did not possess the appropriate United Synagogue rabbinical 'practice certificate'.

Boteach said: 'This is an ongoing attempt to silence individuals like myself who have never been accepted by the mainstream Jewish establishment.'